'Vertical integration' bill moves in Sacramento

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A bill that aims to put an end to alleged sweetheart deals between studios and their parent companies has passed the California Senate Judiciary Committee.

SB1765 was introduced in February by state Sen. Sheila Kuehl (D-Los Angeles), a former child star, as a result of years of litigating so-called "vertical integration" lawsuits filed by profit participants, including actors, directors and writers. The lawsuits usually claim that the studios fail to get the fair market value on TV programs when dealing with their parent networks.

Most recently, "Will & Grace" creators Max Mutchnick and David Kohan sued NBC over profits from the Emmy-winning series. The case went to trial last year and eventually was dismissed following a confidential settlement.

"Studios should not be allowed to undervalue their products in sweetheart deals with their own parent company and cost creative talent and crewmembers their rightful share in residuals and contributions to health and welfare funds," Kuehl said.

The WGA West and Teamsters back the bill.

WGA West president Patric Verrone said SB1765 is "good public policy because it ends a long-standing Hollywood accounting technique that has cost the talent community, both above and below the line."

Added Teamsters California legislative director Barry Broad, "Our members, who are truck drivers, animal trainers, location managers and casting directors in the film and television industry, depend on residual payments for their health and welfare benefits."

Not everybody is behind the bill. Obvious challengers are the studios, led by the MPAA and its president, Dan Glickman, who wrote Tuesday in an op-ed piece in the Sacramento Bee that the bill undermines the deal that ended the writers strike. Glickman's piece ran before the judiciary committee vote.

"After shaking hands on an agreement that gave neither side everything it wanted, but that allows our economy and our industry to move forward, the Writers Guild leadership apparently turned immediately to Sacramento seeking permission to renege on its side of the bargain," Glickman wrote.

In a statement released after the vote, the MPAA said the law, if passed, "would set a dangerous precedent for future labor negotiations."

Eventually, the state senate and assembly will vote on the bill. If passed by both houses, the bill would end up on Gov. Arnold Schwarzenegger's desk later this year.